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Insurers React to CMS 2014 Updates for Medicare Health and Drug Plans

According to a report from Reuters, proposed reductions in government payments for Medicare Advantage insurance plans — estimated at $11 billion — have sent health-insurer stocks tumbling.

Humana Inc. said that the planned cuts would affect its growth in 2014.

On February 15, the Centers for Medicare and Medicaid Services (CMS) announced several proposed rules for Medicare programs, including lower payment rates for Medicare Advantage.

Since the Affordable Care Act (ACA) was passed in 2010, Medicare Advantage premiums have fallen by 10%, and enrollment is expected to increase by an estimated 28% through this year, according to the CMS. In addition, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310 — down from $325 in 2013 — and cost-sharing amounts will also be lower.

CMS also announced a proposed rule implementing the ACA’s medical loss ratio (MLR) requirements for Medicare Advantage and prescription drug (Part C and Part D) plans, with the aim of promoting greater accountability and transparency. The proposed rule limits how much plans can spend on marketing and overhead and how much profit they can make.

Under the ACA, Medicare health and drug plans must meet a minimum MLR beginning in 2014. Plans must spend at least 85% of revenue on clinical services, prescription drugs, quality improvements, and/or direct benefits to beneficiaries in the form of reduced Medicare premiums. Enrolled seniors and individuals with disabilities will get more value and better benefits as plans spend more on health care, according to the CMS.

Reuters reported that shares were down for Humana, UnitedHealth Group Inc., Aetna Inc., and Cigna Corp.

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